Law 106 – IIIB | Group 1 – Agustin, Esteban, Gancayco, Ledesma, Miñano
Chapter: Securities Regulation Code
Case Name: Cemco Holdings, Inc. v. National Life
Insurance
Case Number: G.R. No. 171815
Date: August 7, 2007
Ponente: Chico-Nazario, J.
Facts:
 Union Cement Corporation (UCC) is a publicly
listed company with two principal stockholders:
Union Cement Holdings Corp. (UCHC), a non-
listed company with 60.61% shares, and
Cemco Holdings, Inc. (Cemco) with 17.03%.
Majority of UCHC’s stocks were owned by
Bacnotan Consolidated Industries, Inc. (BCI)
with 21.31%; Atlas Cement Corp. (ACC) with
29.69%; and Cemco with 9%.
 BCI informed the Phil. Stock Exchange (PSE),
thru a disclosure letter, that it and its subsidiary
ACC had passed resolutions to sell to Cemco
BCI’s stocks in UCHC equivalent to BCI’s
21.31% and ACC’s 29.69% (total = 51%).
 As a consequence of the disclosure, the PSE
inquired to the SEC as to whether the Tender
Offer Rule under Rule 19 of the Implementing
Rules of SRC is not applicable to the purchase
by Cemco of the majority shares of UCC.
 The SEC responded to the query that the
Tender Offer Rule is not applicable, which was
also confirmed by the SEC En Banc in a
Resolution/Letter dated July 27, 2004.
 Aggrieved by the transaction, respondent
National Life Insurance Company, which is the
minority stockholder of UCC sent a letter to
Cemco demanding the latter to comply with the
rule on mandatory tender offer, which was
however refused by Cemco.
 Thus, a Share Purchase Agreement was
executed by ACC and BCI as sellers, and
Cemco as buyer.
 Respondent National Life filed a complaint
against Cembco, UCC, UCHC, BCI and ACC,
with the SEC asking it to reverse its
Resolution/Letter dated July 27, 2004, and to
declare the purchase agreement void, and
further prayed that the mandatory tender offer
rule be applied to its UCC shares. In their
Comment, they uniformly argued that the
tender offer rule is applicable only to a direct
acquisition of the shares of the listed company
and did not extend to an indirect acquisition
arising from the , purchase of the shares of a
holding company of the listed firm.
 SEC’s Ruling: in favor of respondent National
Life and directed petitioner Cemco to make a
tender offer for UCC shares to respondent
National Life and other holders of UCC shares
in accordance with Section 9(E), Rule 19 of
SRC.
 Cemco challenged the SEC’s jurisdiction to
take cognizance of the complaint and its
authority to require Cemco to make a tender
offer for UCC shares.
 CA’s Ruling: SEC decision is affirmed
Issue/Ratio:
WON SEC has jurisdiction over the complaint
and to require Cemco to make a tender offer for
UCC shares to respondents? – YES.
 YES, the SEC was acting pursuant to Rule
19(13) of the Amended IRR of the SRC and
Section 5.1(n) of the SRC, which provides to
wit:
13. Violation
If there shall be violation of this Rule by
pursuing a purchase of equity shares of a
public company at threshold amounts without
the required tender offer, the Commission,
upon complaint, may nullify the said acquisition
and direct the holding of a tender offer. This
shall be without prejudice to the imposition of
other sanctions under the Code.
5.1. The commission shall act with
transparency and shall have the powers and
functions provided by this code, Presidential
Decree No. 902-A, the Corporation Code, the
Investment Houses law, the Financing
Company Act and other existing laws.
Pursuant thereto the Commission shall have,
among others, the following powers and
functions:
Xxxx
(n) Exercise such other powers as may be
provided by law as well as those which may be
implied from, or which are necessary or
incidental to the carrying out of, the express
powers granted the Commission to achieve the
objectives and purposes of these laws.
 The foregoing provision bestows upon the SEC
the general adjudicative power which is implied
from the express powers of the Commission or
which is incidental to, or reasonably necessary
Law 106 – IIIB | Group 1 – Agustin, Esteban, Gancayco, Ledesma, Miñano

to carry out, the performance of the

administrative duties entrusted to it. As a
regulatory agency, it has incidental power to
conduct hearings and render decisions fixing
the rights and obligations of the parties
 Moreover, Cemco is barred from questioning
the jurisdiction of SEC because it had
participated in all proceedings before the SEC
and prayed for affirmative relief.

WON the mandatory tender offer rule applies to

direct acquisition of shares in a listed
company? – YES.
 The SEC and the Court of Appeals accurately
pointed out that the coverage of the mandatory
tender offer rule covers not only direct
acquisition but also indirect acquisition or “any
type of acquisition”.
 Under Section 19 of Republic Act No. 8799, it
is stated:
o Tender Offers. 19.1. (a) Any person or
group of persons acting in concert who
intends to acquire at least fifteen percent
(15%) of any class of any equity security
of a listed corporation or of any class of
any equity security of a corporation with
assets of at least Fifty million pesos
(P50,000,000.00) and having two hundred
(200) or more stockholders with at least
one hundred (100) shares each or who
intends to acquire at least thirty percent
(30%) of such equity over a period of
twelve (12) months shall make a tender
offer to stockholders …..
 Under the existing SEC Rules, the 15% and
30% threshold acquisition of shares under the
foregoing provision was increased to 35%, and
further provided that the mandatory tender
offer rule is still applicable even if the
acquisition is less than 35% when the
purchase would result in ownership of over
51% of the total outstanding equity shares of
the public company.

Ruling: WHEREFORE, the Decision and

Resolution of the Court of Appeals dated 24
October 2005 and 6 March 2006, respectively,
affirming the Decision dated 14 February 2005of
the Securities and Exchange Commission En Banc,
are hereby AFFIRMED. Costs against petitioner.